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Which States Profit Most from Sin Taxes?

In 2011, state governments collected more than $50 billion in taxes and proceeds from vice: gambling, smoking and alcohol consumption.

August 19, 2013

In 2011, state governments collected more than $50 billion in taxes and proceeds from vice: gambling, smoking and alcohol consumption.

Some argue that state governments should not profit from residents’ vices. However, some states rely on these activities for a substantial proportion of their budget. In Nevada, “sin taxes” accounted for nearly 6% of the state’s revenue. Based on data from the Census Bureau and the American Gaming Association, 24/7 Wall St. identified the states where the largest percentage of revenue came in the form of proceeds from alcohol, tobacco and casino taxes, as well as the lottery and state-regulated liquor stores. These are the states profiting most from sin.

Excise taxes on tobacco are among the most politically charged and varied in the country. While Rhode Island charges $3.50 in taxes per pack of cigarettes, states like Virginia and Missouri charge less than $0.50.

Frequently, consumption is higher in the states making the most from sin taxes. For example, many of the states that profit the most from sin rely heavily on tobacco revenue. While tobacco tax rates are relatively low in some of these states, sales are higher than the national average. In fact, the states with the highest taxes for alcohol and tobacco do not necessarily bring in the most money.

Relative to some of the other sin-related sources of income, taxes on alcohol are not a big source of revenue. However, some state governments opt to control liquor sales, which can involve regulating stores and collecting commissions. In others, it can even mean warehousing and selling the liquor directly to consumers. In New Hampshire, state-controlled liquor sales accounted for 1% of the state’s income.

While alcohol and tobacco are factors in some of the states that profit most from sin, gambling is almost always a much more significant source of income. In five states, casino tax revenue accounted for more than 2% of state revenue.